In the last week of March 2020, when the equity market indices were falling like ninepins, my team convinced me to shoot a brief five-minute video that was shared exclusively with our investors.
The primary objectives were to sooth frayed nerves and provide reasons to not just stay the course with quality existing investments but also buying aggressively via SIP or STP into the funds curated by our team based on the life-cycle stage of investors.
Most of our investors took the cue. Coincidentally perhaps, from the very next day, the BSE Sensex and NSE Nifty commenced its bounce back and April turned out to be the best month for equity indices since 2009.
That suggested that a correction could be round the corner. But did it also mean that it was time to sell and await the next correction to reinvest? Perhaps so, if one is a trader or has achieved a near-term goal. For the rest, our message remained: Stay Invested, Stay Patient.
There is adequate anecdotal evidence to suggest that patience is the key to wealth creation. If I look back at the journey of the BSE Sensex since my college days, it stood at 510 points in January 1987 and then soared to a new high of 4,285 points by January 1992, before dropping to 1991 points within a year in January 1993.
The BSE Sensex then soared once again to 5,887 points at the turn of the century in January 2000, before literally halving to 2,924 points in January 2003. From a point where all seemed lost, we witnessed a huge secular bull run over the next five years that took the index to 20,873 points in January 2008.
The index once again slipped sharply to 8,674 points within a year in January 2009, before making a fresh outbreak in late 2013 to end up at another new high of 28,233 points in January 2016. At the turn of the decade, earlier this year in January 2020, the BSE Sensex was once again riding a new high at 42,273 points before the Covid-19 pandemic brought it down to its knees at 25,638 points in March 2020.
Well, the long and short of this barrage of data is to drive home the point that, unless one belongs to an at least hitherto class of fictitious and extraordinary investors with the ability to repeatedly time entry and exit from the markets with unerring accuracy, the next best thing to do is to select carefully and then stay invested.
I learnt this Art after a decade of investing, during which period, like most newcomers to the market, I believed in taking profits when I saw one. It took me a decade of investing to realise that the road to creating wealth was quite different from the temporary thrill of having the boasting rights for a spectacular year where one took profits off the table in time.And to stay on that long winding road to wealth
creation, one needs to have patience. Lots of it.
Ashok Kumar heads LKW-INDIA. He can be reached at ceolotus@hotmail.com